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Industry 'Swamped' by FERC's NOPR, NOI; Requests Extension

Citing the breadth of the undertaking as the reason, six trade
associations last week jointly asked FERC to extend by 74 days the
deadline for the gas industry to respond to the major notice of
proposed rulemaking (NOPR) and notice of inquiry (NOI) that were
issued in July.

Both Commission efforts "embrace a vast number of issues
affecting the interstate gas transportation market, which, if
promulgated, would effectuate a comprehensive change in the current
way of doing business...Between the NOPR and NOI, commenters are
[being] asked to address approximately 200 separate issues," the
trade groups said. Their request, if agreed to by FERC, would push
back the comment deadline from Nov. 9th to Jan. 22nd. They have
asked for expedited action on the request [RM98-10, RM98-11,
RM98-12].

Groups seeking the extension include the American Gas
Association, the Interstate Natural Gas Association of America, the
Natural Gas Supply Association, the Independent Petroleum
Association of America, the Process Gas Consumers Group/American
Iron and Steel Institute, and the National Association of Consumer
Advocates. It was the second time in the last week that industry
groups backed away from FERC's latest megaNOPR (See GISB report
this issue).

Many of the issues posed by the NOPR and NOI don't lend
themselves to easy answers and demand industry solutions, the
groups pointed out. "For example, the auction proposal is
conceptual in nature and the details of how the auction would be
run are not spelled out [in the NOPR]. This industry is called upon
to step forward and fill in the details." At the same time, "the
NOI poses many questions of serious financial consequences to the
industry that require a thoughtful response."

"We're buried. The Commission basically laid on us...with the
NOPR and the NOI a reconsideration of the entire regulatory
structure without giving us very much detail," said a trade group
representative in explaining the need for the extension. The NOPR
addresses the regulation of short-term transportation services.
Specifically, it proposed the removal of existing price caps on
short-term (less than one year) firm, interruptible and
capacity-release transactions in return for pipelines conducting
auctions of that capacity. The proposal has come under intense fire
from industry because FERC provided scant detail about how the
auctions would be carried out. The NOI, on the other hand, focuses
on the regulation of long-term transportation services, raising
issues such as the negotiation of terms and conditions of services
and review of straight-fixed variable rate design.

"The auction [as outlined in the NOPR} is all 'if then.' If you
do this, then you should do something else that way. If you do it
this way, then you've got to do the same thing differently. It's
driving people up the wall," noted the source, who requested
anonymity. "And the fact the auction was totally unexpected, I
think, by all the elements of the industry" has added to the
confusion.

Even the Commission staff is having its share of trouble with
the auction proposal. "...[W]hen we had some meetings [last] month
with Kevin Madden [director of the Office of Pipeline Regulation]
and his people about auctions, one of the interesting things that
happened...was they started arguing with each other. So I don't
think the staff, and I can't say anything about the commissioners,
even has a clear vision of where this should be taken."

He doesn't think FERC will deny the gas industry's request for a
delay. "Everybody's been telling us, at least the FERC staff has
been telling us, that the Commission's not going to move on this
quickly," the source noted, referring to both the NOPR and NOI. "I
get the sense...that there's no rush to judgment."

The NOPR and the NOI, specifically the auction proposal, also
were a hot topic among executives at the Gas Industry Standards
Board (GISB) annual board meeting in San Antonio, TX, last week.
"Let's face it. We asked them [the FERC] to do something like this
with respect to secondary market issues. [But] as the FERC moves
forward it needs to be careful to prioritize in order to avoid
adopting mutually exclusive rules," said Bill Boswell, vice
president, secretary and general counsel for Peoples Gas.

"The thing that comes to mind here to me at least most
obviously is we have all of these intraday nominations standards,
which in addition to being GISB standards are FERC regulations, and
how does that fit with daily auctions, which FERC has on the table
right now. They are potentially mutually inconsistent.Does it
obviate the need for the rules we already have on the books right
now which FERC already decided were pretty darn good?" he asked.

Also, the Commission "needs to avoid standing in the way of
what customers want, and putting my LDC hat on, one of the things
we think our customers want right now is the ability to have
prearranged deals," Boswell said. "FERC does not appear to like
prearranged deals, at least in terms of the initial thrust of the
NOPR. I think that position, if that's what it is, needs to be
revisited."

Meanwhile, there has been a lack of enthusiasm for the
convoluted new regulatory hoops FERC has suggested the industry set
up and then jump through. The million-dollar question for LDCs and
others is: "Is the removal of price caps worth the cost?" FERC
seems to believe "LDCs were very, very hot on removing the price
caps...We had a number of issues that came under the heading of
secondary market concerns, and while removal of price caps was one
of those, it's not the leading one," Boswell noted. "Indeed, when
we initially raised it somebody. [indicated it would be] simply
nice to have. It's probably higher than nice to have right now, but
considering what FERC would want in replacement of the removal of
price caps we have to ask ourselves whether those are things such
that the juice may not be worth the squeeze."

Mike Bray, vice president of corporate rates and regulatory
affairs at Duke Energy, also agreed the cure proposed by FERC might
be a bit too drastic. "FERC seems to be overly concerned about the
market power issue. I also agree with [the] observation that the
current system seems to work okay. Maybe it just needs some
fine-tuning."

Susan Parker; Joe Fisher, San Antonio

&COPY;Copyright 1998 Intelligence Press, Inc. All rights
reserved. The preceding news report may not be republished or
redistributed in whole or in part without prior written consent of
Intelligence Press, Inc.

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